Technicolor's Eric Rutter Describes How North American Cable Industry is Responding to Changing Consumer Dynamics and New Economics of Component Costs

"We recognize that with greater competition, we need to be planning with our customers even earlier in the process and engaging in that thought leadership discussion earlier. While we are making our own investments, I think it is important for us to push towards making co-investments with our customers in key technology options. This will increase the likelihood for success in the long term."
--Eric Rutter, Technicolor
 
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Eric Rutter - Technicolor
Eric Rutter - Technicolor
ATLANTA - Oct. 31, 2018 - PRLog -- As new competitive dynamics and shifting consumer behaviors change the economic landscape for the Network Service Provider community, new go-to-market strategies that leverage partnerships across the value-chain will be critical to the future operations of North American cable providers, says Eric Rutter, President of North American Cable at Technicolor, in a new audio interview for journalists.

While much of the conversation around consumer behavior has centered on subscriber demand for over-the-top (OTT) providers, Rutter points out the actual situation is far more complex.

"We are seeing a lot of change take place very quickly in the industry. A growing segment of subscribers are consuming content on tablets, phones and other mobile devices. This has translated into the presence of fewer set-top boxes per household. The industry average -- at its height -- was roughly two and a half set-tops per home. Now we are seeing that trending towards below two boxes per household," he explains.

Without adjusting to this trend, this could contribute to significant reductions in the ability of cable companies to generate revenue.

"But cable providers are adjusting. They know they need to find additional ways to drive revenue, which is why you are seeing the rollout of other key services -- like home automation and home security - which rely on high-performance broadband and Wi-Fi services. This, in turn, is driving the need to push intelligence into the cloud, so that cable providers can provide greater service flexibility -- and more secure services. Ultimately, I think you will see software-based, virtual CPE solutions that will allow for greater interoperability and flexibility of control," he says.

The virtualization of CPE will enable a seamless user experience through integration of new IoT based services as well as allow for greater customer segmentation and content choices.

Another key trend in the North American cable sector revolves around the spiking costs of component parts -- such as Multilayer Ceramic Chip Capacitors (MLCC).

Rutter explains that the very trends that are contributing to more automation in the home -- such as the robust performance of mobile phones and tablets, and the proliferation of intelligent Internet-of-Things (IoT) devices -- have not only driven up the costs of memory chips and related components but have created shortages that have disrupted supply chains. This represents a new structural reality for the industry. The first step to dealing with the new situation, is to recognize it and understand it clearly, he says.

"When we first discovered this shortage, we had about a week's worth of visibility and predictability in the supply chain management. Since then we have taken several steps to extend that visibility so that we can help our customer better plan their operations. We've done a good job of establishing a spot buy desk and related additional processes to manage the stop buy market and purchase MLCCs at a premium. That has allowed us to gain greater visibility into the market -- upwards of four to six weeks.

As a result, Technicolor has been able to renormalize its operations and get back to meeting normal supply commitments.

"However normalizing operations doesn't come without a premium. Technicolor is spending almost $50 million worldwide on the capacitor up cost alone. That cost doesn't include all the administrative burden of managing a crisis like this. But Technicolor is committed to being as predictable as possible and to ensuring supply chain continuity. That is why we have been willing to make these investments, to ensure we are meeting our customers' expectations," he says.

To sustain these strategic investments, however, relationships throughout the value chain will have to be redefined, with customers, partners and suppliers.

"We recognize that with greater competition, we need to be planning with our customers even earlier in the process and engaging in that thought leadership discussion earlier. While we are making our own investments, I think it is important for us to push towards making co-investments with our customers in key technology options. This will increase the likelihood for success in the long term," he says.

The same dynamic must be at work with partners and suppliers.

"I see a greater need for partners to combine and integrate their operations in the ecosystem to offer more flexible solutions to the service providers, Rutter says. "That is why Technicolor has recently launched a strategic partnership and innovation initiative called the HERO Program. This will allow us to integrate a plethora of choices for the service provider. We will be able to integrate as many services as is needed in a more flexible way. We think it is a way for us to differentiate ourselves in the marketplace."

To listen to the audio interview with Eric Rutter, visit:

https://www.dropbox.com/s/xqbfind347v2uu9/TCH%20--%20Eric%20Rutter%20SCTE_Interview%20--%20100318.mp3?dl=0

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